ENERGY GUEST BLOG -- HEIDI GOROVITZ ROBERTSON

The landmen cometh, but do you really know who they are?

Blog Entry: June 14, 2013 4:30 AM | Author: HEIDI GOROVITZ ROBERTSON

Heidi Gorovitz Robertson is a professor of law and the associate dean for academic enrichment at Cleveland-Marshall College of Law.

There has been a fair amount of legitimate hand-wringing in Ohio over the business practices of some landmen operating in the state on behalf of some drilling companies. There also are a fair number of people who have never heard of a landman and can't imagine their role in the oil and gas exploration and production industry.

So, what are landmen?

According to the American Association of Professional Landmen, they execute leases for landowners' mineral rights on behalf of drilling companies. They also do research to determine the ownership status of underground minerals by searching both public and private records. They review title status and work to cure any title defects so as to reduce title risk associated with their drilling company's ownership of mineral rights. Basically, landmen are agents who represent oil and gas companies in those companies' efforts to secure rights to drill for oil and gas on people's land.

Landmen are paid by oil and gas companies to secure mineral leases with terms favorable to the companies. To entice their target landowners, landmen often offer upfront bonuses and royalty payments. But it's difficult for landowners, who are understandably not savvy to the ins and outs of oil and gas leases, to know what the lease might really be worth.

Landmen, eager for their commissions, are known to hurry landowners into signing on the proverbial dotted line. They may tell the landowners that their neighbors have already signed, whether or not that is true. They may tell the landowners that if they don't sign immediately, the deal will disappear. For people without means, the upfront money may be too good to resist, even if it binds them to an unfavorable lease.

Although there have been some legislative efforts in Columbus, landmen's professional conduct is not specifically regulated in Ohio. The Ohio Department of Commerce regulates the conduct of Ohio's residential real estate agents, but to date, it has no authority to regulate landmen in the oil and gas industry.

Some argue that because landmen handle leases, not sales, the landmen's efforts should not be regulated by the Department of Commerce. I find this argument unpersuasive, because even in leasing mineral rights, landowners are giving up important property rights, even though they are not selling all of the rights that come along with property ownership. Still, the Department of Commerce is not the only option for regulating the conduct of landmen.

State Rep. Mark Okey, D-Carrollton, in March 2012 introduced the Truth in Leasing Act (House Bill 493), but it failed to gain the requisite support for passage.

Had it passed, HB 493 would have required that landmen register with the Ohio Department of Natural Resources. It would have required ODNR to publish certain information on its website regarding each registered landmen. Perhaps most significantly, it would have required registered landmen to provide landowners with oil and gas leasing statutorily prescribed disclosure information, to explain the relevant forms and information clearly, and to obtain the landowners' initials indicating that the provisions and disclosures had been clearly explained.

Certainly, these requirements could be minimized and manipulated. Have you ever signed off at the prescription drug counter indicating that the pharmacist has explained the instructions concerning the drugs you've purchased, when that never really happened? Have you initialed the provisions of a loan application indicating that you agree to them, when you don't really know what they mean? Still, the requirements of HB 493 would have been small but helpful and symbolic steps towards providing landowners with the information and understanding they need to make informed decisions with respect to their land.

Some landmen and the companies that employ them have agreed to abide by codes of ethics. Many belong to the American Association of Professional Landmen, whose members agree to be bound by a published code of conduct, encouraging members to act honestly and fairly. They also must satisfy some continuing education requirements. Still, there have been numerous reports and allegations by landowners and politicians of landmen dishonesty and manipulative behavior.

So, we have voluntary codes of conduct and no legislation on the matter. But we do have something else.

The Landman Report Card was started to assist landowners in this tricky process by allowing landowners to educate and assist one another. Available at landmanreportcard.org, the Landman Report Card provides tools for landowners and others to learn about individual landmen and their companies by reading reviews submitted by users. It also allows users to contact other users and to use the site as their own private diary of interactions with the oil and gas industry.

The site is produced by the ExtrAct group at the Massachusetts Institute of Technology, in collaboration with citizens' alliances in several states, and the Oil and Gas Accountability Project. ExtrAct is funded by MIT's Center for Future Civic Media, a research group focused on developing novel web-based technologies for citizen journalism. It's a reputable project.

To be truly useful, though, it needs to become more active in Ohio.

The website, in its embryonic stages in terms of the collection of information on landmen operating in Ohio, is of limited current value because of the small number of Ohio reviews. But in theory, and in the future, and as we wait for viable Ohio legislation, it could provide a quick and easy way for landowners to get a fuller sense of who they're talking to when landmen come knocking at their door.

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